Amid supply chain crisis, product price increases in U.S. and China

The supply-chain disaster is putting inflationary pressure on global economy, including the U.S. and China. U.S. businesses hit by labor shortage and supply chain crisis are raising product prices, after having endured ever-rising costs. China, which is dubbed as the world’s factory, has been hit by electricity outage and rising costs of raw materials, has seen a huge increase in inflation.

As China’s inflation is likely to spread to the entire world, South Korea has been alarmed by import prices. Critics forecast that economic recovery interfered by supply chain crisis, U.S.’s economy growth in the third quarter might be expected to be half of the previous quarter.

According to The New York Times and Reuters on Wednesday, major U.S. companies, which disclosed their third quarter earnings on the day, has hinted price rise. They shift an increase in costs due to rise in commodity prices and labor costs to consumers.

McDonald’s announced that it would raise menu prices by about 6% due to increased ingredient and labor costs. The fast-food giant is reportedly under heavy cost pressure from labor shortages that drove the company’s labor costs up by more than 10%, along with a maximum of 4% increase in the prices of ingredients and other materials. Kraft Heinz that already increased its product price by 1.5% in response to inflation stated that it would maintain its pricing strategy well into next year, implying a possibility of further price raise. Coca Cola announced in its earning report that it may increase the price of its beverages in the face of high labor and logistics costs. 3M, a global consumer goods company, also stated that it is facing higher costs related to polypropylene and high labor costs and that it would increase the price of its products to respond to inflation and supply chain pressure.

The price rally of many global companies is attributable to the unprecedented labor shortages and supply chain crisis. The number of monthly job openings in the U.S. has soared above 10 million, yet labor shortages are driving companies to raise wages. A bottleneck at ports and land logistics have caused businesses to heavily rely on a high-rate air freight, and some businesses are even chartering their own container ships.


Jae-Dong Yu jarrett@donga.com